I'm the Detroit bureau chief for Forbes, which means I spend most of my time covering the automotive industry. But I also keep an eye on the rest of America's heartland—where stuff is manufactured and grown. I've been on the auto beat for more than 20 years at Forbes, Business Week and the Detroit Free Press. At the Boston Globe, I rode the tech bubble for a while, but I found there's nothing quite as fun as the auto beat. Whether you drive a car or not, everyone has an opinion about cars or car companies. What's yours?

1/25/2012 @ 6:26PM76,418 views

Why Ford Needs To Worry

This article originally appeared in the February 13, 2012 issue of Forbes magazine. (It has been updated to include 2011 year-end results.)

The coronation went exactly according to Ford’s script. At the North American International Auto Show in Detroit 2,400 reporters hushed as video screens the size of tractor trailers flooded their vision. A booming voice shook Joe Louis Arena: Two household names, Toyota Camry and Honda Accord, dominated the midsize car business last decade. “Then,” said the voice, “something changed.” Their sales and market share ran flat in 2008. When the recession hit, they plummeted. “What you might not realize is that Camry and Accord never recovered.” Camry sales fell 31% ­between 2007 and 2010. The Accord fell 28%. Both slid further after the 2011 quake in Japan.

But not the Ford Fusion. Its sales rose 66% in the last four years. By 2011 it passed the Accord, but still trailed the Camry and Nissan’s Altima.

Cue the loud music, the smoke ­machine and the car: the reinvented ­Fusion, a pretty sedan with premium features like technology that keeps you in your lane or helps you parallel park. When it goes on sale later this year, it’ll be available with a variety of fuel-efficient power trains: gasoline, hybrid and plug-in hybrid that Ford says will get the equivalent of 100mpg—better than a Chevrolet Volt or a plug-in Toyota Prius. No price just yet.

The message is unmistakably aggressive, arguably arrogant: Ford just redefined the midsize-car market. The rest of the field, including General Motors’ redesigned Chevrolet Malibu and the popular Hyundai Sonata, should pack it in. “I think we’re going forward with some quiet confidence,” Ford’s president of the Americas, Mark Fields, said later that evening over a filet mignon dinner with reporters at the stately Detroit Athletic Club. Aggressive? Nah. “We’re just laying out some facts.”

As anyone in this town will tell you, believing one’s own hype in the car business is more reckless than texting while driving. Just ask General Motors.

Ford should keep this in mind. While it would have you believe that the new Fusion is the latest in a string of product home runs—stylish, fuel-efficient cars, loaded with technology, that consumers around the world are dying to drive— here in the U.S. facts suggest otherwise.

Let’s start with the Fiesta, Ford’s smallest car. Introduced in 2010, it had a decent first year, but it’s already fading. In the last two months of 2011 Chevrolet’s new Sonic handily outsold the Fiesta, which is among the highest priced in the segment. Ford ended the year with 126 days of supply but says that’s typical for December. Dealers generally like to have 60 days’ supply or less.

Then there’s the Focus, Ford’s new compact. It, too, has great looks and lots of premium features (and a premium price). But it was outsold by the Toyota Corolla, Honda Civic, Chevy Cruze and Hyundai Elantra in 2011. Launch issues last spring hurt production—some bad dashboards and transmissions—but those seem to have been ironed out. Now there’s a glut: 89 days’ worth.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

I think all U.S.-based car companies are a bad investment. Cars are basically differentiated commodities. Between China coming on board and Hyundai, Kia & VW ramping up production; then the perceived quality advantages of the Japanese and European car makers, I don’t see how the Big 3 will be able to compete. Also, all the foreign auto plants in the USA are non-union; another cost-disadvantage for the Big 3. Then you have the GM & Chrysler bailouts; which is political favoritism and gives these reborn car companies a cost advantage over everyone else. Let’s face it. The UAW union & Management pumped millions of $$s into B. Hussein Obama and the Democrats campaigns. Then B. Hussein Obama, Nancy Pelosi & Harry Reid turned around & gave their contributors billions of taxpayer $$s to buy votes in future elections. In summary, given that cars are really a differentiated commodity; the Japanese fixing their production issues; and the cost disadvantage of American-owned car companies; I would be very hesitant buying Ford, GM & Chrysler.

Like the author to this article, you appear to know literally nothing about cars.

Your preconceived notions are what helped sky-rocket Toyota and Honda resale value, and plummet Domestic vehicle resale value, in the past 12 years. It’s the mentality that a German or Japanese car is automatically better than an American car, something that was true two decades ago, and only in specific instances, it’s THAT mentality that has the “Big Three” struggling today.

The last-gen (2006-2011) Camry wasn’t at all special, yet sold nearly half a million vehicles a year in the US. The Pontiac G6, a vehicle I bought new in 2007 and have since replaced with a 2012 Ford Focus SEL hatch, cost me $20,300 for the V6 Package (most of the GT’s parts but minus the cost), a comparable Toyota Camry at the time cost $25,500. Same equipment, HUGE price difference. By all means, please spend the extra five grand up-front and then get it back at resale time – I would sure hope you would, or you’d be a moron to buy the car.

The Pontiac G6/Saturn Aura and now Chevy Malibu all were/are better than that generation of Camry. The Nissan Altima of the time was also a better vehicle. The revamped Mazda 6 was superior. The 2010 Hyundai Sonata and 2011 Kia Optima were better cars than the Camry. The Fusion (first and second gen) were better cars. The list goes on, yet the Camry sold better. When Toyota recalled 11 MILLION Camry’s, it still sold better. The American public was and is completely full of morons. They spend more money on a lesser car, by the hundreds of thousands.

The 2012 Ford Focus has a nicer interior and power-train, both in NVH and fuel economy, than the Honda Civic. It also has better NVH and a better interior, along with better build quality, than the Hyundai Elantra. It’s similar, but still slightly superior than the Chevy Cruze in terms of interior build quality, and again wins in NVH. The newly re-done Jetta has an inferior interior to the Focus, ironic given the last-gen Jetta had a BETTER interior than the new Focus. I won’t mention the Corolla because it isn’t AT ALL competitive, and you’d have to be blind as a bat to even consider one against any of the other vehicles I just mentioned.

The Focus pokes into Fusion territory for the same reasons the Cruze pokes into Malibu territory – the current Fusion and Malibu, while both attractive cars, are on par or inferior to their lesser siblings because they’re both set to be refreshed in the next few months, and both moved up-market, much the same way the Focus was moved up-market from it’s previous iteration, and the Cruze was moved WAY up-market from the awful, not good since 2006 Chevy Cobalt it replaced.

When I went to the Ford dealership, I went there to test drive a Fusion (if only because I’m 6’5). I knew the new Focus was an incredible car (as it should be, given Ford spent one BILLION dollars developing it) but figured I’d be better fitted to the Fusion. Within ten minutes of being at the dealership, I was in a Focus and my mind was made up. The NVH was better and the interior and build quality felt as good and in some areas nicer. What really sold me however were the added utility of the hatch combined with the significantly better fuel economy of the Focus, combined with the fact a similarly equipped Fusion would’ve run me $24,700, whereas my Focus was $21,900.

Back to my original point – in this current market, something you don’t seem at all familiar with – the Domestic offerings in the B and C segments are both superior to all competition. The Fiesta and Sonic are the two best offerings in the segment, one that’s recently been crowded by an admittedly good 2012 Kia Rio and 2013 Hyundai Accent, along with an over-rated Honda Fit. The Focus and Cruze best all competition, with the next nearest being the new Jetta, and the Elantra. The Elantra still has build quality and NVH to sort out, which isn’t surprising given Hyundai’s emphasis on cheap-ness, though.

In the next few months, the new Fusion will be THE best vehicle in the segment, if the Mondeo has anything to say about it, and the new Malibu will be nearly if not just as good. I’ve sat in both, and both feel like they’re competing with a Buick LaCrosse or Nissan Maxima caliber vehicle more than the lowly Toyota Camry. The Fusion has the looks on the out-side to match this improved interior, which is what will make it stand apart from it’s competitors.

Let me get this straight – compact and subcompact car supplies are high in the dead middle of winter in a country full of people who would rather take a 5,000 pound SUV to the grocery store, by themselves, than use it to haul people or tow a boat because they feel it makes them safer or drive better in the snow, and that makes Ford doomed?

The Fiesta has a BRAND NEW competitor, and in the past 8 months has had several other new competitors actually worth looking at all release, and therefore it’s doomed?

Companies like Zip car buy the Focus, because it’s genuinely a good car (I would know – I bought one over an awkwardly proportioned Cruze, ugly and unimpressive Civic and over-rated Elantra), and overall their sales predictions are stable and current as of a strategy hashed out at least two years ago, and the Focus is doomed?

And didn’t the author of this article basically miss the point of Ford going up-market when she previously questioned why the Focus cut into the Fusion’s price range? Has she SEEN the new Fusion, have any idea what the Mondeo stands for in Europe or have a clue about… anything? At all?

I’ve never subscribed to Forbes, and after how CLUELESS this author demonstrates herself to be, I never will.

Joann, You should mention in your point on quality and the number of recalls that GM and Chrysler were absolved of the need for all recalls on vehicles manufactured before their Bankruptcy and that is no longer a proper measure of quality.

The saddest part of this article is that GM (Government Motors) products can still be included in this equation. Ford did not use taxpayer money to artificially keep itself alive. Their product line is very strong in many segments. Their new Focus is gloriously beautiful and quite strong in foreign markets. They have not had the big problems like Toyota and Dodge (transmissions are still junk). The F-150 is still a brilliant product. I do not currently own a Ford product but rest assured that my next purchase will be a Ford product. Because they make good vehicles at proper prices, have a decent enough reliability, good looks, and have not already managed to steal some of my own hard earned money.

A pretty worthless article with a misleading title. There’s nothing new here at all, and the message that “there’s more work to do” is something that Ford management has been saying as well. In short, there’s no reason for Ford to worry. They’ve got the best product lineup in the industry, and are well positioned to lead.

I know this is a comment on an old article… I own a 2001 Ford Focus….and the car has been phenominal. Other than having to replace some hoses, a timing belt, and the shocks…..nothing has been done to my car other than normal maintenance….the car is still getting about 33 mph highway driving in headwinds in mountains.

When I buy a new car at the end of 2013….it will be another Ford. Waffling between another Focus or the Fusuion.

And when I bought the car, I test drove Camry, some Chrysler vehicle I can’t recall, and a Huyndai. Ford has the best heater and air conditioner on the market….which considering I lived in a place with cold snowy winters, and then hot summers was important to me….and it had a better interior, and better power. And had more options at a cheaper price….being a recent college grad, that was also important to me.

Thank God, a year later, the author’s perspective has proven even more errant than it was when written.

As much of a work in progress Ford may be, absolutely nothing about today’s Ford indicates a maker content with resting upon its laurels. Key to its success has been emphasizing the business it’s been willing to abandon as much as opportunities it’s chosen to pursue.

By pursuing ONLY the most highly profitable opportunities, not only is Ford exempting itself from the pursuit of churn, it’s not stripping buyers out of the market for another ownership cycle and better positioned than BOTH GM and Chrysler whose massive overstocks keep them even more reliant upon incentives than Ford is upon fleet trade.

Despite the sector’s highest cost structure, Ford wins some of its best margins – far better than GM and Chrysler. The simple fact that Ford’s fleet trade is purely additive, rather than being a less profitable alternative to retail.

Furthermore, by elevating the quality of Ford’s entire product portfolio, the Blue Oval now occupies the same price strata Mercury once held, and the greater profit Ford is winning on each transaction in margin FAR exceeds both competitors growth in share and the marketspace’s growth overall.

Ford continues to revolutionize its entire product portfolio including its truck business heading into ’13 and beyond. NO maker but VW and Toyota is entirely out of the woods, but Ford is both tactically and strategically FAR better positioned than its domestic rivals and many esteemed import makers too.